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Where To Find Hidden Assets: The IRS

Where to Find Hidden Assets: the IRS

One of the more interesting tasks that a forensic accountant does during a divorce involves finding and exposing marital assets that one of the spouses has hidden or dissipated. Sometimes, one partner will accuse the other having hidden assets, which would result in an improper equitable distribution. In those cases, it is best for the spouse to have some idea of where or how the dissipation is being done. In other cases, the forensic accountant can “trip” over the asset, as when a spouse is using the Internal Revenue Service as a savings account.

The IRS = a Piggy Bank

  • Here is one way that a husband used the IRS as a savings account to hide uncollected tax refunds, i.e. hidden assets.
  • In 2014, the wife filed for divorce, and engaged me as her forensic accountant a year later. The wife did not work, and the husband was a marketing manager for a major corporation. He was a salaried employee, and he received a W-2 at the end of the year. As for most divorces, my charge was to value the marital estate for equitable distribution, and to determine each party’s income for support purposes. I looked at 4 years of jointly-filed tax returns (2013 to 2016) to establish an income trend.
  • Over those four years, the husband’s income showed some moderate gains. He earned $98,000 in 2013, $100,000 in 2014, $113,000 in 2015, and $111,000 in 2016. In those same years, his tax liabilities were $7,000, $1,500, $7,000, and $8,000, respectively. While the actual amounts were not out of the norm, the tax returns looked strange, which led the wife’s attorney to subpoena the IRS for the tax returns that were actually filed. What a difference!
  • In 2014, the year that the wife filed for divorce, the husband sent $20,000 to the IRS as an estimated tax payment. In that year, he was entitled to a refund of $7,000. But he elected to receive only $3,000 of the refund, and to leave $4,000 for the following year’s taxes. The result was that there was $24,000 of the couple’s money at the IRS, waiting to be claimed.
  • In 2015, the husband increased his withholding taxes, adding another $16,000 to his overpayment. At that point, there was $40,000 available to the couple from the IRS. In 2016, the husband added another $17,000 to his IRS “savings account” through excess withholding. By the time the case went to trial, the husband had banked $57,000 at the IRS.

Trained Eyes

Hidden assets can be difficult to track down, because there are many ways to conceal them. Nevertheless, forensic accountants like myself are trained to leave no stone unturned, which is what led me to the IRS in this case.

Do not hesitate to hire a forensic account, whether or not you suspect your partner might have hidden assets. In this case, the wife was unaware of any wrongdoing, and uncovering these assets made a big difference in her divorce!

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